Christmas tree growers reduce plantings after years of oversupply
By MATEUSZ PERKOWSKI
Oregon farmers are planting fewer Christmas trees even as sales continue to climb year after year, according to the USDA's National Agricultural Statistics Service.
The seeming disconnect between supply and demand offers an "unusual snapshot" of current conditions in the Christmas tree market, said Bryan Ostlund, executive director of the Pacific Northwest Christmas Tree Association.
"We will very soon have far fewer trees available than we currently sell," Ostlund said.
In 2008, growers reported selling more than 7.3 million trees, up 10 percent in five years, according to a new report from NASS.
However, farmers only planted about 6 million trees last year, down nearly 40 percent from five years ago.
In 2009, they expect to plant fewer than 5.5 million trees.
The disparity is probably linked to the crop's slow maturation, said Mark Arkills, production manager for Holiday Tree Farms, a major Oregon tree producer.
Farmers were consistently planting more than 9 million trees a year between 2002 and 2004, according to NASS.
Those trees are now reaching maturity. So, although farmers are now selling more than 7 million trees a year, that still leaves a surplus of roughly 2 million trees, Arkills said.
Growers are pulling back on planting to alleviate the current oversupply, he said.
"While tree sales may be going up, it may not be at the prices people want to be receiving," Arkills said.
Indeed, the average price per tree has fallen from about $17 in 2003 to about $15 in 2008, according to NASS.
Actual prices may be even lower for many growers, since sales agreements differ among farmers and buyers, Ostlund said.
"It's all over the board," he said, noting that trees sold commercially in bulk fetch lower prices than those sold directly to on-farm visitors. "It's a completely different animal."
Typically, the Christmas tree industry takes about seven years to build up an oversupply and up to five years to work itself out of a surplus, he said.
"From what I hear, this is about the third time they've been through this roller coaster," Arkills said.
Farms on an "even keel" in terms of tree production and marketing will likely be able to withstand the volatility, especially if the industry can sustain sales of more than 7 million trees per year, he said.
Less established growers without a reliable client base face a greater threat, Arkills said.
"The people who are suffering are those with trees in the ground who don't have a market," he said.
Trees that don't sell one year can be only be held over for a limited amount of time before they grow beyond the ideal market size of 6 to 7 feet, Arkills said.
"You can only really get away with that for a year or two, then the trees start to get overcrowded," he said. "There's a point where you need to cut them down."
In the case of Douglas fir, the trees can also be left to grow into a stand of timber, he said.
Though NASS reports that sales are outpacing plantings, the imbalance has not generated a noticeable reaction among growers, said Barbara Hupp, co-owner of Drake's Crossing Christmas tree farm and seedling nursery near Silverton, Ore.
"It doesn't seem to be worrying people," Hupp said. "Seedling sales are way down."
The tree sales statistics don't necessarily reflect what many farmers are seeing in the market, she said.
"I really can't believe the sales stayed up that much," Hupp said. "We certainly haven't sold as much in the past couple of years."
Tree unit sales appear to be up but that doesn't correlate with higher revenues for many farmers, since consumer demand may have shifted to less expensive trees, Ostlund said.
Low planting levels nonetheless indicate the Christmas tree market will be facing a different dynamic in coming years, he said. Exactly how that affects the industry as a whole remains to be seen.
After the last downturn in the late 1980s and early 1990s, for example, the Pacific Northwest and North Carolina increased their share of the bulk commercial market, Ostlund said.
The Great Lakes region and the Northeast, meanwhile, largely shifted to on-farm, choose-and-cut operations, he said.
However, it's unlikely Oregon will be similarly pushed out of the bulk commercial market, Ostlund said. "If there's a demand out there, they'll find a way to fill it."
Staff writer Mateusz Perkowski is based in Salem, Ore. E-mail: email@example.com.